India is a vast country with huge population, where most of the population lives in rural areas with many un-electrified villages and others facing frequent and prolonged power failures on regular basis. The high average solar irradiance of \(5 KWhr/m^2/day\) to \(5.5 KWhr/m^2/day\) is offering a huge opportunity for solar energy sector to flourish and eradicate the acute problem of power shortage of India.

Solar PV installed capacity in MW

End of Year

Total capacity (MW)

YOY growth rate (%)

2011

161

2012

461

186.3

2013

1205

161.4

2014

3002

149.1

India has achieved 3 GW of solar PV installation in the year ending 2014. Gujarat, Rajasthan, Madhya Pradesh, Maharashtra and Andhra Pradesh are the top 5 states which contribute more than 85% of the total solar PV capacity installed in the country. The government policies have been the main reason for the growth in the solar energy sector.

The Solar Photo-voltaics (PV) Growth

Factors propelling the growth of solar PV in India

The falling prices of the PV panels: The average price, per watt, of solar panels has fallen from $6 per watt in the year 2000 to almost $ 0.6 per watt in the year 2014. This has made the solar electricity an economically feasible option and by looking at the rate of fall in the prices, the solar electricity will become the most preferable option to generate electricity. The solar electricity is expected to make grid parity by 2016 and we will see a demand shift from grid to solar.

The rising prices of electricity from the grid supply: With increase in the fuel prices, coal and gas, the electricity prices are likely to increase in coming years. An urgent need to shift from dependence on limited fossils fuels and search for abundant and reliable energy source has helped in pushing the growth of solar energy sector in India.

The economic growth and the changing life style: India is a growing economy and the fourth largest energy consumer in the world. Its inflation adjusted GDP is growing almost at the rate of 7% over last 10 years and the energy demand is growing at an average rate of 3.6% per annum over last 30 years. In order to cover its growing energy demands, India cannot rely every time on costly imported fossil fuels. The solar energy is one of the best options to meet the rising energy demand of Indiaâ€™s growing economy. India imports almost 80% of its energy needs from foreign countries, widening the fiscal deficit. India has to diversify into renewable energy to make itself a self-reliant and energy secure country.

Growth accelerators

Regulations and Policies: The Government of India has introduced the Renewable Energy Purchase obligation (RPO) through Central Electricity Regulatory Commission (CERC). In this RPO, the 15% of the energy requirements have to be met by renewable energy sources by 2020 and for solar power it is 3% for each state. The firm implementation of these policies will yield better results. The decentralized regulatory mechanism for the solar PV with different power supply model will further push the solar growth India.

Financing: This is the main problem in India, banks are apprehensive in offering loans for the solar projects because of the uncertainty in the performance of the solar plant after installation and lack of data on the performance of the previously installed plants. The proper financing mechanism can accelerate the process of solar power implementation in the country.

Incentives and Tax benefits

Central government subsidies: MNRE provides 30% subsidy on roof top solar PV installations. There are few states like Uttrakhand, Tamilnadu, Kerala which are providing additional 20% subsidy, making it a total of 50%. The adoption of additional subsidy by other states of India will help in implementing solar PV installations uniformly across the country.

Accelerated depreciation: A company can claim up to 80% depreciation in the very first year of the installation and can avail the income tax benefit.

Net Metering: State governmentsâ€™ net metering scheme (Please read Net Metering: An important feature of a grid-tied solar PV system) for the grid tied roof top solar PV installations is giving additional advantage to the owner. Under this scheme, the owner of the solar power system can sell the surplus electricity, generated from his/her solar power system, to the grid and units gets credited into his/her account.

The road ahead

It is very much possible for India to achieve its solar energy targets through strict implementation of the policies, providing decentralized regulatory mechanism and easy availability of finance for the solar projects.